Zepto just filed its DRHP. It wants to open 1,900 new dark stores, on top of the 1,139 it already runs. Blinkit, the only profitable player in the sector, is racing to 3,000 stores by March 2027. Meanwhile, its adjusted EBITDA is just Rs. 37 crores — not a lot considering the billions that have been spent on getting it to profitability.<br>The dark store is quick commerce&#x27;s core bet — and its biggest fixed cost. Rents are rising, FMCG prices are up, and user growth at Zepto actually declined between December and March despite spending over Rs 1,300 crore on advertising.<br>The model is scaling. But will the economics ever catch up?<br>Tune in.<br>Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Zepto's DRHP underlines the inevitable cost at the heart of quick commerce

Daybreak

# Full Transcript

**Podcast:** Daybreak

## Participants

- **Nikita Sharma** (The Ken)

## Transcript

A couple hundred meters away from the Indiranagar metro station, between a juice shop and a car and bike service center, is a Blinkit dark store. It's not very big and it's not for any of us to browse through. Right outside it, delivery drivers wait on their bikes. Some chat, some scroll, some grab a quick bite before the next delivery. And every few minutes, some go inside and leave with brown paper packages.

In about 10 minutes, someone in a PG or an apartment building will receive their orders of late night ramen or cold meds. Different flavors of cures for the rainy chilly nights right now. Now, we've all heard about and know in theory what dark stores are. There are thousands of them sprinkled across the country, but most of them are concentrated in dense urban residential areas. Most of the time, consumers like you and I don't really give them a second thought.

Out of sight, out of mind. But as Zepto's DRHP filed early this month showed, it's one of the most core infrastructure for a quick commerce company to scale. Now, Zepto's proposed public issue includes a fresh issue of shares worth 8,010 crore rupees and an offer for sale of nearly 11.35 crore shares by existing shareholders.

And as Outlook Business reports, a substantial portion of the fresh issue proceeds is directly going to fuel the expansion of Zepto's dark store network. The company has earmarked more than 1,600 crore rupees to open 1,900 new dark stores across existing and new markets. That's on top of its existing 1,139 stores, by the way. Now, that's a staggering total number of 3,039 stores.

It's clear that Zepto is planning on going neck and neck with the current market leader, Blinkit. Blinkit's current CEO, Albinder Zinsa, said last October that the company plans on increasing its dark store count to 3,000 by March 2027. And that's saying something because Blinkit is the sector's only profitable player with more than 2,200 stores right now. And it is still expanding aggressively.

Because that's what the model demands. These small warehouses are an integral piece in the quick commerce puzzle. Scale and success for companies in this space is incredibly dependent on their dark store density. But there's an uncomfortable truth here that's rarely discussed. Dark stores are a fixed cost.

No matter what happens, whether demands are slow or high or workers are striking, rents have to be paid, warehouse workers have to be salaried, and shelf space has to be filled. The more dark stores that open, the more these fixed costs soar. And there's still no clear case that exists that proves that the returns are as inevitable as the cause. But there is, in fact, a cautionary tale. You must remember Danzo.

One of India's first hyperlocal delivery apps, which had pretty much become a verb. Just Danzo it was a thing people actually used to say. But despite its popularity, the comp...

Zepto's DRHP underlines the inevitable cost at the heart of quick commerce

Transcript

Built for investment professionals

Every day you wait, your competitors are finding
edge in conversations you're not hearing.

Zepto's DRHP underlines the inevitable cost at the heart of quick commerce

Transcript

Built for investment professionals

Every day you wait, your competitors are findingedge in conversations you're not hearing.

Every day you wait, your competitors are finding
edge in conversations you're not hearing.